Berliant, Marcus and Yu, Chia-Ming (2012): Locational signaling and agglomeration.
Download (345kB) | Preview
Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at that location. When workers' marginal willingness to pay for housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery equilibrium where only the core-periphery (partially stratified) equilibria are stable. When workers' marginal willingness to pay for housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core-periphery equilibrium. Location can at best be an approximate rather than a precise sieve for high-skill workers.
|Item Type:||MPRA Paper|
|Original Title:||Locational signaling and agglomeration|
|Keywords:||Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling|
|Subjects:||R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies
|Depositing User:||Marcus Berliant|
|Date Deposited:||11. Oct 2012 12:16|
|Last Modified:||19. Feb 2013 04:23|
Alos-Ferrer, Carlos, and Prat, Julien, "Job Market Signaling and Employer Learning," Journal of Economic Theory, CXLVII (2012), 1787-1817.
Austen-Smith, David, and Jeffrey S. Banks, "Cheap Talk and Burned Money," Journal of Economic Theory, XCI (2000), 1-16.
Baum-Snow, Nathaniel, and Ronni Pavan, "Understanding the City Size Wage Gap," Working Paper, Brown University and University of Rochester, 2009.
Bayer, Patrick, Robert McMillan, and Kim Rueben, "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Paper No. 10865, 2004.
Berliant, Marcus, and Fan-Chin Kung, "Can Information Asymmetry Cause Stratification?" Regional Science and Urban Economics, XL(2010), 196-209.
Berliant, Marcus, and Charles C. Yu, "Rational Expectations in Urban Economics," Working Paper, Washington University in St. Louis, 2009.
Crawford, Vincent P., and Joel Sobel, "Strategic Information Transmission," Econometrica, L (1982), 1431-1451.
Fang, Hanming, "Social Culture and Economic Performance," American Economic Review, XCI (2001), 924-937.
Forslid, Rikard, and Gianmarco I.P. Ottaviano, "An Analytically Solvable Core-Periphery Model," Journal of Economic Geography, III (2003), 229-240.
Fukao, Kyoji, and Roland J. Benabou, "History versus Expectations: A Comment," Quarterly Journal of Economics, CVIII (1993), 535-542.
Glaeser, Edward L., and David Mare, "Cities and Skills," The Journal of Labor Economics, XIX (2001), 316-342.
Glaeser, Edward L., and Albert Saiz, "The Rise of the Skilled City." Harvard Institute of Economic Research, Working Paper No. 2025, 2003.
Gould, Eric, "Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium," Review of Economic Studies, LXXIV (2007), 477-506.
Greenwald, Bruce C., "Adverse Selection in the Labour Market," Review of Economic Studies, LIII (1986), 325-347.
Grossman, Sanford J., "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, XXIV (1981), 461-483.
Krugman, Paul, "Increasing Returns and Economic Geography," Journal of Political Economy, XCIX (1991a), 483-499.
Krugman, Paul, "History versus Expectations," Quarterly Journal of Economics, CVI (1991b), 651-667.
McGuire, Martin, "Group Segregation and Optimal Jurisdiction," Journal of Political Economy, LXXXII (1974), 112-132.
Rothschild, Michael, and Joseph E. Stiglitz, "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," Quarterly Journal of Economics, XC (1976), 629-649.
Spence, A. Michael, "Job Market Signaling," The Quarterly Journal of Economics, LXXXVII (1973), 355-374.
Starrett, David, "Market Allocation of Location Choice in a Model with Free Mobility," Journal of Economic Theory, XVII (1978), 21-37. U.S. Census Bureau, "1990 Population and Housing Unit Counts: United States," 1990 Census of Population and Housing (Washington, D.C.: U.S. Census Bureau, 1990).
Wilson, Charles, "A Model of Insurance Markets with Incomplete Information," Journal of Economic Theory, XVI (1977), 167-207.